PaisaCalc
Gratuity Calculator — 15/26 formula and ₹20 lakh tax-free limit
Gratuity is 15 days' wages for every year of service, paid when you leave a job after at least five years (one year on a fixed-term contract). Enter your last monthly Basic + DA and years of service to see the amount and how much of it is tax-free.
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|---|
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National Pension System — corpus at 60; at least 20% (government staff: 40%) must buy an annuity that pays the pension.
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Gratuity = last wages (Basic + DA) × 15 ÷ 26 × years of service (Code on Social Security, 2020).
India tax & savings tool · always in ₹ (INR), whatever currency you pick above.
Estimate your monthly in-hand from annual CTC (New tax regime, standard assumptions).
How big a loan you may qualify for, from your income and existing EMIs (FOIR method).
What today's money will cost — and be worth — in the future.
How the Gratuity Calculator works
Gratuity = Last wages × 15 × Years ÷ 26
- Last wages — last drawn monthly Basic + Dearness Allowance (+ retaining allowance). Under the Labour Code, if your other allowances (HRA, conveyance, bonus and the like) are more than half of your total pay, the excess is added to wages
- Years — completed years of service; a final part-year of more than six months counts as a full year
- 15 ÷ 26 — 15 days' wages, taking a month as 26 working days
The statutory amount is capped at ₹20,00,000; an employer may pay more by choice. Income tax exempts gratuity up to ₹20 lakh over your whole career, so the calculator shows the part above that as taxable. Since 21 November 2025 these rules sit in the Code on Social Security, 2020 (section 53), which replaced the Payment of Gratuity Act, 1972 with the same formula and ceiling.
Sources
- Code on Social Security, 2020, Chapter V (sections 53–58) — gratuity, formula and ceiling (India Code)
- PIB backgrounder, 22 Nov 2025: “Code on Social Security, 2020: Towards Universal and Inclusive Social Protection” — one-year rule for fixed-term employees, 50% wage rule
- Income Tax Department FAQ — gratuity tax exemption limit raised from ₹10 lakh to ₹20 lakh
Rules and rates checked . Also in the PaisaCalc app, with the other India tax & savings tools.
Worked example
Last Basic + DA of ₹50,000 a month, leaving after 9 years 7 months:
| Years counted | 10 (the 7 extra months are more than six) |
|---|---|
| Calculation | 50,000 × 15 × 10 ÷ 26 |
| Gratuity | ₹2,88,462 |
| Taxable (above ₹20 lakh) | ₹0 |
Gratuity payable is about ₹2,88,462, all of it tax-free. Leaving at 9 years 5 months would count only 9 years: ₹2,59,615.
Load these numbers into the calculator →Frequently asked questions
How is gratuity calculated?
Last drawn monthly Basic + DA × 15 × completed years of service ÷ 26. For example ₹50,000 × 15 × 10 ÷ 26 = ₹2,88,462. A final part-year of more than six months counts as a full year.
When do you become eligible for gratuity?
After five years of continuous service with the same employer. Since 21 November 2025, fixed-term contract employees qualify after one year, on a proportionate basis. There is no minimum service on death or disablement.
What is the maximum gratuity?
The law requires an employer to pay at most ₹20,00,000. An employer may pay more by choice, but anything above ₹20 lakh is taxable.
Is gratuity taxable?
Gratuity is tax-free up to ₹20 lakh in total over your working life, across all employers; the part above that is taxed as salary. Gratuity paid to government employees is fully tax-free.
Which salary is used: CTC, gross or Basic?
Your last monthly Basic + Dearness Allowance, not CTC or gross pay. Under the Labour Code, if allowances such as HRA, conveyance and bonus are more than 50% of your total pay, the excess is added to Basic + DA for gratuity.
What if my employer is not covered by the gratuity law?
An employer outside the law may still pay gratuity under its own policy. For tax, the exempt part is then half a month's average salary (of the last 10 months) per completed year, up to the same ₹20 lakh.
Related calculators
- In-hand Salary Calculator — monthly take-home pay from CTC, which includes a gratuity provision
- Income Tax Calculator — income tax under the Old and New regimes
- Sukanya Samriddhi Calculator — putting part of a gratuity aside for a daughter, tax-free
- FD Calculator — what a lump sum earns in a fixed deposit
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PaisaCalc results are arithmetic estimates from the inputs you enter and the formulas shown. They are not financial, investment or tax advice; rates, rules and your own situation vary, so check with your bank, fund house or a qualified adviser before deciding.
